The Metaverse Podcast - P2E 2.0 - A New Economic Model for Gaming, the Audiobook

Primer: In this special episode of The Metaverse Podcast, we have Jan Baeriswyl of Outlier Ventures going through with listeners the economics of play-to-earn (P2E) gaming. He covers 5 blockchain games, discusses Axie Infinity as a case study, and concludes with the roles that are emerging from the P2E ecosystem.

P2E 2.0

• Gaming is becoming increasingly relevant in today’s world. The average gamer spends 8+ hours per week in the digital realm

• In P2E 1.0, only the most competitive tournament players would earn from gaming

• In P2E 2.0, every gamer earns by playing in the emerging crypto-powered version of P2E. The addition of crypto tokens to fundamental game dynamics is what makes it P2E 2.0

• The pandemic significantly accelerated the P2E movement

• Axie Infinity is supporting/substituting the income of struggling households in emerging markets during COVID

• Games are onboarding an entire new class of users to crypto

• Will be covering 5 games in this overview. Included classics like CryptoKitties and Gods Unchained to provide some historical context

“What better situation than an online game that not just provides entertainment but also a stream of income?”

- Jan Baeriswyl

CryptoKitties

• Was one of the earliest attempts to deploy blockchain tech for leisure and a pioneer for NFTs

• Gained popularity in December 2017. Was famous for crashing Ethereum because of the all time high number of transactions

• Supply of kitties keep inflating as they keep mating

• There are certain guarantees around the scarcity of rare cryptokitties:

  • Generation Zero cats are limited to 50,000

  • Most rare are Founder Cats which are the first 100 cats to ever exist

  • Mutations are another factor that increases rarity. It is expressed probabilistically as a new cat is bred according to the genetic algorithm

  • Exclusive cats that were given to team members and close contributors of the project

• Players earn money through breeding and selling cryptokitties to collectors

Gods Unchained

• A turn-based digital card game

• Its tremendous growth in 2019 have helped strengthen conviction around blockchain-based gaming projects

• Players battle 1-on-1 against other players or a computer adversary, with the goal of reducing their opponent’s life to zero

• Players start with a set of 140 digital cards for free and win additional cards as they play the game

• Players can mint their card into an NFT when they have two identical cards. Minting allows them to own their in-game assets and to transfer/sell/borrow them even outside the context of the game

Sorare

• Company operates a fantasy football soccer collectible game that uses NFTs

• Sorare has signed with 126 soccer clubs

• Each season, Sorare auctions cards for the players of the signed teams, with each card having versions with 3 different levels of rarity

• Players can resell the cards on an internal marketplace

• Sorare makes money on auctions of cards

• The in-game performance of the cards depend on the real world performance of the player on each card

• Players enter teams comprising of five cards in tournaments

• Prizes are in ETH and additional NFT cards

Axie Infinity

• Game revolves around pets called Axies which can be bought, raised, and traded

• Players can duel their team of Axies against one another to earn the in-game currency

• Players generate revenue by breeding and selling Axies and trading other in-game assets such as land and native tokens

Zed Run

• A digital horse racing game

• Has similar breeding mechanics to CryptoKitties and Axie Infinity

• Users build a stable by buying, selling, and breeding digital race horses

• An in-game currency, ZEST, is used to pay out prizes and to fuel the in-game economy

Innovation In In-Game Currencies

• Present in Axie Infinity (through battling) and Zed Run (through racing)

• This improves the value proposition of the NFTs and makes them yield-bearing/NFT lending viable

• Yield Guild is acquiring useful NFTs and lending them out to gamers for a portion of the yields

• Sorare and Gods Unchained create utility for their NFTs more indirectly through paying out prizes in tournaments

What We Have Seen Thus Far

• NFTs provide an extremely flexible primitive for P2E games to allow users to own their in-game items

• P2E games build on each other’s designs, evolving the mechanisms and adding new twists

Axie Infinity As A Case Study

• Axie Infinity is the top NFT game and one of the most used apps on Ethereum

• Each Axie is an ERC-721 token with unique characteristics that influence its rarity and in-game utility

“A part of crypto’s mission from the beginning has been financial inclusion and open sourcing access to the digital economy.”

- Jan Baeriswyl

• Ecosystem consists of 2 tokens:

  • In-game currency called Smooth Love Potion (SLP)

  • Governance token called Axie Infinity Shards (AXS)

• An Axie’s value is determined by a combination of rarity and utility:

  • Origin Axies are limited to a supply of 4000

  • Even rarer are Mystic Axies which are a subset of Origin Axies

  • Utility is determined by an Axie’s usefulness in battles

• Axies have a breeding limit

• Axies are organized in teams of 3 for battles against other teams. Players take turns playing cards that correspond to their Axie’s attacks until one team is fully defeated

• Players win SLP for winning battles. SLP is burnt for breeding Axies, which partially offsets the inflation of the token

• AXS holders can deposit their tokens for yield within the governance platform

Roles In An Emerging P2E Ecosystem

• Emergence of 5 different roles:

  • P2E gamers

  • NFT investors

  • Breeders

  • Coordinators

  • P2E Gaming Guilds

P2E Gamers

• P2E gamers play games and earn tokens for winning. Can be further differentiated into:

  • Casual gamers don’t rely on it as a source of income. Hence, they engage with the game in a more irregular manner and for fun

  • P2E gamers who play games as their main source of income are called Metaverse workers. They engage with it on a daily basis and know the ins and outs of the game intimately

NFT Investors

• Most P2E games require an initial investment to get started

• As this investment is not affordable for most people, NFT investors create a scholarship model where they lend out their assets to P2E gamers for a cut of their earnings

Breeders

• Many of the current P2E games are based on genetic algorithms

• The newly created NFTs probabilistically inherit traits from their parents according to the algorithm

• Traits can be dominant or recessive, with occasional random mutations

• Breeders specialize in finding the best possible matches out of a given set of NFTs

• Is capital intensive relative to other roles

Coordinators

• A role that emerged to support the primary roles of P2E gamers, investors, and breeders

• Identified the following types of coordinators:

  • NFT brokers — Needed to headhunt for an owner of a high value NFT

  • Breeding matchmakers — Needed to find the optimal combinations within a collection of NFTs

  • Scholarship managers — To manage communications with scholars and to help them when they encounter issues

Guilds

• All the roles described above can be organized within larger structures to form guilds

• Can be formal DAOs or informal online communities managed via Discord

• Can be focused on a specific game or operate across multiple platforms

All information presented above is for educational purposes only and should not be taken as investment advice. Summaries are prepared by The Reading Ape. While reasonable efforts are made to provide accurate content, any errors in interpreting and summarizing the source material are ours alone. We disclaim any liability associated with the use of our content.